Optimism is my strong suit—and my weakness. My mantra: Capitalism is optimism monetized. We invest new capital with an abiding faith that richer returns will come of it.
But these days a new pessimism gnaws at me. I struggle to quell this queasy feeling that, a few years out, we could face a long and relentless decline in our economy and in the markets. Not because Wall Street blows it again on the oxymoron of risk management—but because of government.
Put it this way: I fear an Obama-tastrophe.
My worry is that President Obama’s overly ambitious political agenda will take a toll on business, hurting investment and growth by spending massive new sums of taxpayer money and imposing a daunting thicket of new and higher taxes, new regulations, scattershot federal crackdowns and brand new government bureaucracies.
One year into office—and with the S&P 500 index up more than 60% from its lows ten months ago—President Obama continues gleefully as Bank-Basher-in-Chief. He’s out today making bankers the bad guys, even though we need them for a full comeback.
Proposing $90 billion in new bailout fees over 10 years, the President says “my determination is only heightened when I see reports of massive profits and obscene bonuses at the very firms who [sic] owe their continued existence to the American people—who have not been made whole. . .”
Wait a minute! A hefty portion of those profits flows right into tax coffers, and with trillion-dollar deficits the government needs all the bank profits it can encourage. Many of the biggest banks—J.P. Morgan Chase , Goldman Sachs and Morgan Stanley among them—already have paid back TARP. They repaid the entire sums, plus interest and dividends, that the government handed them (and forced on a few of them) under the Tarp bailout plan.
So why does Obama want to make them pay twice—and spare several hundred smaller banks that also got TARP money? Over all, TARP, originally set at $700 billion, now looks likely to cost less than $100 billion. And the Fed just turned a $45 billion profit on its separate rescue efforts. A profit!
This latest slap-tax on giant banks, and the hue and cry over compensation, isn’t really aimed at making “the people” whole—not at all. It is, rather, a cynical ploy by Washington to divert attention away from an unemployment rate still stubbornly at 10%, higher than when Bam took office. Best distraction: Blame the banks!
It is part of a deleterious new mindset in Washington that criminalizes capitalism and decries wealth creation. After 30 years of less-government-is-better, the Obama Posse wants to ensure that Big Government is the only answer. And Big Government requires fat taxes.
So many new taxes have been proposed that Americans for Tax Reform, a conservative, anti-tax group, can’t clock a grand total. Ryan Ellis, the lobby’s tax policy director, pegs the total at somewhere near $200 billion a year in new and higher taxes.
“If the goal is to create 1970s stagflation,” Ellis says, “permanently hiking taxes by hundreds of billions per year is a good way to do it.”
The Democrats’ tax litany is exhaustive and alarming. Rep. Dennis Kucinich wants a 75% tax rate on banker bonuses (why doesn’t he just move to Switzerland?). See our interview with him on “Power Lunch” yesterday. (See the accompanying video)
The Democrats are looking at adding a Medicare tax, now slapped on paychecks, to investment income as well—a de facto extra tax increase on capital gains.
Elsewhere, the Obamacare health plan would levy 18 new tax increases, in the Senate version, including a penalty fee on businesses that don’t insure their workers, and a stiff tax on workers who refuse to buy coverage. It also would impose extra tax surcharges on the highest earners, or put new taxes on the richest plans.
Except for the richest plans that cover union executives: Reports today say the unions won’t face any tax hike until 2017 at the earliest. That is so nakedly political of the Dems and a new President who made so much noise about bringing “change” to Washington.
The Dems also want to triple the tax on hedge funds, private equity and venture capital—the investment engine that drove our 1990s boom. In California, all taxes combined would push the rate to an outrageous 59% for venture capitalists. Why raise a new VC fund at all if government takes a cut that would make the Mafia proud?
But wait! There’s more! The White House proposes a stiff increase in taxes on U.S. firms’ overseas earnings. Brace yourself, also, for carbon taxes on utilities, oil companies and other big users or generators of electricity. All this, plus the Bam Plan to let the Bush tax cuts expire and raise rates on capital gains, dividends and high earners.
Didn’t we learn, long ago, that if you want to raise tax revenue you LOWER underlying tax rates; that if you want more of something, tax it less, and if you want less, tax it more? In Washington today, the ruling party views taxes as a sex addict revels in his trysts: More is better, and there is no such thing as too much.
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- Follow Kneale at twitter.com/denniskneale